Question

Solomon Company, which expects to start operations on January 1, 2018, will sell digital cameras in shopping malls. Solomon has budgeted sales as indicated in the following table. The company expects a 10 percent increase in sales per month for February and March. The ratio of cash sales to sales on account will remain stable from January through March.

Required

1. Complete the sales budget by filling in the missing amounts.

	Sales January February March Cash sales $47,000 Sales on account 109,000 Total budgeted sales $156,000

1. Determine the amount of sales revenue Solomon will report on its first quarter pro forma income statement.

Sales Revenue: _____

Answer 1

Sales budget
Sales	January	February	March
Cash sales (Note 2)	$47,000	$51,700	$56,870
Sales on account (Balancing figure)	$109,000	$119,900	$131,890
Total budgeted sales (Note 1)	$156,000	$171,600	$188,760
The amount of sales revenue Solomon will report on its first quarter pro forma income statement = Total budgeted sales for January + February + March
=> $156,000 + $171,600 + $188,760 = $516,360
Note 1: Computation of total budgeted sales
Total budgeted sales for February	$156,000 +10% of $156,000 = $171,600
Total budgeted sales for March	$171,600 +10% of $171,600 = $188,760
Note 2: Computation of Cash sales
Cash sales to toal sales ratio = $47,000 / $156,000 x 100 = 30.128%
February = 30.128% of $171,600 = $51,700
March = 30.128% of $188,760 = $56,870